document.write( "Question 1191925: The current share price of a stock is $95.00. The stock will pay an annual dividend of $7.00 in the following 3 years. The first dividend will be paid one year from now. The continuous compounding interest rate is 4%. Determine the forward price of the forward contract that matures in 3 years. Round your answer to the nearest dollar. \n" ); document.write( "

Algebra.Com's Answer #823787 by ikleyn(52786) $\"\"$ $\"About$

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\n" ); document.write( "The current share price of a stock is $95.00.
\n" ); document.write( "The stock will pay an annual dividend of $7.00 in the following 3 years.
\n" ); document.write( "The first dividend will be paid one year from now.
\n" ); document.write( "The continuous compounding interest rate is 4%.
\n" ); document.write( "Determine the forward price of the forward contract that matures in 3 years.
\n" ); document.write( "Round your answer to the nearest dollar.
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document.write( "Make a Table\r\n" );
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document.write( "    Year    make                   pay            Balance\r\n" );
document.write( "            compounding            dividend\r\n" );
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document.write( "      1     95*2.71828^0.04        98.88 - 7      = 91.88\r\n" );
document.write( "            = 98.88\r\n" );
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document.write( "      2     91.88*2.71828^0.04     95.63 - 7      = 88.63\r\n" );
document.write( "            = 95.63\r\n" );
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document.write( "      3     88.63*2.71828^0.04     92.25 - 7      = 85.25\r\n" );
document.write( "            = 92.25\r\n" );
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document.write( "ANSWER.  After 3 years, the stock is $85.25; the total dividend paid in 3 years is $21.\r\n" );
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document.write( "         The total price is  $85.25 + $21 = $106.21.\r\n" );
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document.write( "         Round as you want.\r\n" );
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